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Taxpayer advocate uses bully pulpit to blast IRS

Olson critics contend that her winner-take-all attitude has caused friction within the IRS. | AP Photo

But there is one area Olson expects the IRS to beat out potential fraudsters: the Obamacare insurance credits.

Starting in 2014, qualifying taxpayers will get a subsidy administered by the IRS to offset the cost of buying health insurance. These credits, Olson predicted, will make an attractive target for the unscrupulous because of the high value the credits will have.

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But the agency has had two years to fine-tune its software and will be cross-checking any credit return with the health insurance exchanges and insurance companies, which Olson said will make the credits an unlikely conduit for fraud.

“It will be very difficult for people to commit fraud effectively,” she said. “There will be efforts, but I don’t know how they will be able to pull it through. They will have to give evidence … and they are going to have to go through quite a detailed qualification process.”

Olson said she believes closing the “tax gap” — the difference between what the government collects and what it is owed — is a fundamental part of her job but explained that her concern about fraud extends far beyond the agency’s collection function.

“I’ve given the IRS a very hard time on its efforts to provide victim assistance. They have not passed my grade. I would say they have failed,” Olson said.

Olson said her team of advocates works with people who need returns to pay heating bills or buy groceries — needs that can’t wait for the IRS investigation process.

Twice a year, the taxpayer advocate releases a report to Congress, detailing the major problems facing taxpayers with suggestions for legislative fixes. This year, the report said the complexity of the Tax Code is the No. 1 issue plaguing taxpayers.

“As the voice of the taxpayers, I want to make sure people never forget there are real taxpayers here suffering with the complexity of the code. It has real impact for real people,” Olson said.

Olson won’t outline specifics of what deductions or credits she thinks should be stripped from the Tax Code, but Olson said she is not a fan of either the Democrats’ or the Republicans’ preferred method for comprehensive reform.

Instead of approaching tax reform as a means to deficit reduction or rate reduction, the focus should be on the structure of the code, she said.

“Talking about tax reform in the context of deficit reduction or spending means that you’re not doing comprehensive tax reform,” Olson said.

When Olson discusses the mammoth code, she says, she talks in terms of people — parents who are confused by the complex regulations for adoption credits or students who need their education credits to pay for books.

Olson remembers what it was like to be confused by the Tax Code — she was an artist who couldn’t afford a tax preparer, so she did her own.